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As I noted earlier, state of South Dakota has officially entered in an agreement with CGI Technologies and Solutions, Inc. to create a new Obligation Recovery Center (yep, that term is still Orwellian). In this post I will look at a few facts about CGI that should give taxpayers pause. Then I will call out some areas of the contract I find interesting, both good and bad. Most of this is really me taking notes for future posts. The more interesting part of the contract, the Scope of Work, I will handle in the next post.

CGI Technologies and Solutions

CGI is of course not a newcomer to the states process of creating a debt collection center. CGI is said to have pushed (lobbied) for HB 1228 (SoDakLiberty Posts) to be passed so the debt collection center could be implemented. The fact that this company lobbied to have a bill passed so it could make money should be quite worrisome to taxpayers.

CGI Technologies and Solutions, Inc. is not a new player in the debt collection industry for governments. A system was implemented by CGI in Hawaii, this was actually mentioned on the floor debate about the bill. Yet a 2010 audit of the system implemented by CGI in Hawaii found many problem areas. The audit shows many problem areas for the software that was implemented, and also possibly shows work that was paid for, yet never completed.

For the above reasons I believe SD taxpayers should be more wary than usual about entering into a contract with CGI.

Now, on to the contract. I’m only calling out certain areas of the contract. Most of it is boring. And from my experience in the IT industry most of it seems appropriate.

Contract Date

The contract actually became effective on November 15, 2015. It will remain in effect until November 14, 2020. It is possible to end the contract sooner (more on that further down). The contract also states that the contract can be renewed for two additional five-year terms.

David Zolnowsky, Commisioner SD Bureau of INformation & Telecommunications, on November 9, 2015

So, as of November 15 the state of SD has entered into a five-year contract with CGI. Hopefully the small-government Republican legislators knew what they were doing by passing HB 1228…

Suspension of Services

Section 8 of the contract provides for suspension of services. Here is what Section 8 says:

If for any reason the Legislature fails to appropriate funds or grant of expenditure authority, or funds become unavailable by operation of law or federal funds reductions this Contract will be terminated by the State. Termination for these reasons is not a default by the State.

I like this inclusion in the contract. If somehow the SD state legislature is able to get enough conservative members it will be possible to get out of this contract without having to worry about repercussions from the contract. The key however is getting enough legislators elected that advocate for small government.

Termination Provision

Section 35 has the actual contract termination language. One interesting addition is that GCI must give 180 days notice before contract renewal if any prices will go up. If this program still exists in 2020, that will be the time to know if any prices for goods and services offered will go up. In my experience that is almost a guarantee.

Handling of Data Breaches

This section is important because the debt collection center will have the personal data of its intended victims. Most of this section seems appropriate (for anyone interested, this is an industry I spent 20 years in). But I do have some qualms about reporting data breaches. CGI is required to notify the State of any breaches, and the State will determine what actions CGI may take. But this sentence is where my qualms come from:

The state will determine whether notification to the affected parties will (1) jeopardize the State’s interest and (ii) be more appropriate for the Contractor to provide notification.

Something about that sentence just doesn’t sit right with me. I’m not sure, but I have a feeling that little sentence could end up being problems in the future…

“Through the creation of this center, state government will be able to more effectively engage those who owe debts to the state or to other citizens,” said Gov. Dennis Daugaard. “Establishing the Obligation Recovery Center requires no upfront financial investment and it will help South Dakotans who are owed court-mandated restitution.”

We are taking a lot of money out of good South Dakotan’s pockets to put into another bureaucracy that we are going to have problems with in regards to accountability. And there is no guarantee that this will work better than the way it was up to this point. And again, the people they are going after is the poorest of South Dakotan’s.

I’ll cut this post short since I’m currently working on a post about the contract between the State and CGI. No matter what, it will be interesting to see how the Republican super-majority will handle constituents asking about this expansion of government as the new debt collection center gains more media attention. Perhaps it could be used alongside large tax increases to place some less fiscal conservative Republicans in danger of a primary election.

The report card grades all 50 states and the District of Columbia on how their regulations regarding the practice of law restrict consumer access to the legal system. Unfortunately, the news is not good, with no state receiving a grade higher than a C.

Barriers to Lawyer Help – SD gets a D

Most of the grade in this category comes from whether the state allows competition of ownership within the state. Specifically it grades if non-lawyers are allowed to own a law firm. Allowing non-lawyers to own a law firm would allow competition and innovation within the industry. That competition would then allow the prices of certain legal services to become lower, and more affordable to the average SD resident. The report points out that most law firms consist of few lawyers, and therefore legal services are tailored for the client. A more innovative approach would be to allow non-law firms to hire lawyers and offer their legal services to clients.

An appropriate place where this might work in Sioux Falls, SD, is Sams Club. Sams Club already offers a plethora of products and services for small business owners. Just think if Sams Club would be able to keep a lawyer on hand that could do basic Articles of Incorporation or basic contracts. Too often new small business owners go to a law firm and pay hundreds of dollars for this very basic legal service that could easily be offered at rates where a firm (such as Sams Club) could still make money and legal customers could save money. Theoretically in a competitive industry Sams Club could hire a lawyer that would provide a service drawing up Articles of Incorporation and other basic legal contracts for their clients. That simple change would allow new businesses to spend more of their startup money on actually getting their business going, instead of paying lawyers to fill out standard legal forms. This method would also give clients the ability to utilize a lawyer at prices they can afford.

(b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.

…

(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:

(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;

(2) a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation; or

(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.

Basically Rule 5.4 means that nobody but a lawyer can own a law firm. I don’t think there is any better example of protectionist policy creating a codified monopoly than this. In guise of being independent, the legal industry has ensured there can be no competition within their industry. That is one of the reasons even basic legal services cost much more than they should. South Dakota appears to deserve its D grade in this area.

Barriers to Non-Lawyer Help – SD gets a B

South Dakota actually did good in this category. Half of this grade has to do with whether consumers are allowed to use non-lawyers for various areas such as preparing certain legal forms, legal advice in certain areas, real estate closings, certain contract negotiations and free advice from family and friends.

The other half of the grade comes from how strictly the state enforces regulations from the first half of the grade. South Dakota’s B grade appears to come from this paragraph included in the report:

South Dakota is one of only 19 states where the attorney general, rather than the bar, enforces unauthorized practice regulations. While these regulations still prohibit services that could be helpful to consumers, the attorney general is less likely than the bar to use them to protect the bar from competition.

I didn’t realize the AG’s office had this role in South Dakota. That is good to hear. Technically it still makes me a bit nervous that a lawyer is in charge of this area. But at least the Attorney General is elected by the people, so if the AG’s Office misuses the oversight of unauthorized legal practices there can be a change made during the next election.

Treatment of Self-Represented Litigants – SD gets a C

This area of the report card looks at how user-friendly the court system within the state is for people who choose to proceed without a lawyer. The Justice Index, released by the National Center for Access to Justice, is the basis for this score. I really think this is an area the states Judicial Branch should focus on (instead of the misguided judicial reform known as PSIA). As the Justice Index notes in its section on Support for Self-Represented Litigants:

In our states, more than 80% of the litigants appear without lawyers in matters as important as evictions, mortgage foreclosures, child custody and child support proceedings, and debt collection cases. Making courts user-friendly for these self represented litigants is imperative if we are to keep the promise of equal justice for all.

This isn’t about people trying to represent themselves in murder trials or nominating petition hearings. Rather it is about the ability of the average person to be able to deal with basic court cases that most likely impact the poorer residents within the state. Perhaps Chief Justice David E. Gilbertson should look at this area and work with the legislature to find ways to make the court system more user-friendly to the average SD resident.

Overall Grade – SD gets a C

Overall SD getting a C isn’t too bad. As I noted before, that puts us at the head of the class. It would be interesting to see the debate in Pierre if a bill were introduced to remove the protectionist ownership of law firms from codified law. I feel that change above anything could bring down the costs of legal services in SD. That reduction in cost would do a lot to provide affordable legal help to the resident of SD.

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It is Thanksgiving week! Due to traveling and a short week at the office I will not be publishing any posts. But I wanted to take a moment to thank all of the readers of this blog for their continued support. Also, I would like to thank everyone who is involved in making the economic marketplace a truly amazing wonder to behold. Technically that includes everyone, so I would like to thank everyone being a part of the free market (or at least what remains of the free market… but that is a subject for another post).

In 1958 Leonard Read wrote a masterful essay named “I, Pencil“. I first read this essay about fifteen years ago and have always thought it a masterful way to explain how free markets can work and adapt without central planning. This essay pointed out the thousands, if not millions, of people who must interact and work together (even unknowingly) to bring a product to market.

The election for the Aberdeen Library Bond has been set for December 15. But early voting has already started, so Aberdeen residents can cast their ballot at the County Auditors Office! About a month ago I published a post with a few of the reasons I oppose the bond for a new library. Mostly I believe a new library is unneeded when the current facility can meet the needs of the community at a fraction of the cost of building a shiny new library. Shortly after that post I spoke with Troy McQuillen, the President of the Library Foundation. In this post I will pass on what McQuillen has to say and add some thoughts of my own. (Due to time constraints of my own it has taken me a month after speaking with McQuillen to do this post).

As I go through this history it was either provided verbally or through literature by Troy McQuillen. And yes, a lot of this post looks at history leading up to this library bond, mostly because I find it relevant in the discussion.

Warning: this is a long post!

Library Foundation

I first spoke with Troy McQuillen about the Library Foundation, mostly because I’ve heard a lot of different stories about what the Foundation is and where its money comes from. McQuillen noted the Foundation is a private entity that has no direct affiliation with the Library or the City of Aberdeen. The foundation was setup in the early 90’s because somebody bequeathed a large plot of land and a another person bequeathed a large coin collection to be used for the library. Until around a decade ago the farm land was rented out and coin collection was kept in a box at the library.

Around 2006 there was talk about improving the library. McQuillen said overall the city had done a good job of funding the library. But the Foundation wanted to do something for the library, such as buying new computers and/or books for the library. It was determined at that time that the library could not accept such a gift because there was insufficient space.

So then the Foundation began to look at ways to build a new library for Aberdeen. The land and coins were then auctioned to net over $500,000 for the Foundation to use. Over the years, investment returns have also given the Foundation money. Those sources left the Foundation over a million dollars to use for library improvements. That McQuillen said, gave the Foundation leverage to move forward with a project.

Before going on I’ll note there doesn’t seem to be anything nefarious with any of the origins of the Foundation or its money. Actually it is the type of private organization I like to see and support.

Plans for a new Library died in 2008

In 2007 the foundation asked a library planning firm to create a study. In 2008 the study was released based upon a comparison around the country and the expected population growth of Aberdeen. That study had four different proposals. The numbers were high and the city council would not support any efforts. One of the biggest problems with these proposals was the massive amount of space included in the plans.

The Bethlehem Lot bought

“Bethlehem Lot”, the site purchased for the new library. Photo by Ken Santema 10/19/15

In 2009 more research was done on a dozen locations for the feasibility of a new library. From that feasibility study it was determined the “Bethlehem lot” was the best location for the new library. This whole block was bought using $350,000 of the Foundations money and was matched by the city for the same amount. McQuillen did admit the Foundation had a requirement placed upon the city when deciding to pay for half of the Bethlehem Lot: the Foundation wanted ground broken on the new facility by 2016. The city agreed to this and had made it one of their priorities.

Room for a Library Bond

Three architects were then brought in to design something to be built on the newly purchased lot. None of these architects were really completing a plan the Foundation felt the City would pay for. So then another consulting company was brought in and took a different approach. Instead of making a huge plan that city could never afford, this planner asked how much could be spent. There happened to be a bond that was just about to be completed, the bond used for the YMCA. The money freed up by completing the YMCA bond was then provided as the money available for a new library bond. This is where the $8,000,000 figure originally came from!

Time for me to add my personal opinion a bit. The pushing point for spending money on a new library was the fact that another bond was paid off and was now available for a new project. Personally I don’t agree with that mentality. Part of me is glad the city isn’t taking on new bonds without waiting for old bonds to be paid off, especially for projects such as this. But, at the same time I don’t see it as fiscally responsible to keep bond payments as high as they were for the YMCA project simply because the city has been making those payments anyways. At that rate this taxpayer dollars will hijacked to pay for bonds into infinity. What is to say that after the library is paid off that the city council won’t find another place they want to spend money. Personally I live on a street (N Kline) that could use some major repair, and I know many other streets in town that are in the same, or even worse, shape. Perhaps it would be a better use of taxpayer dollars to find a more conservative means of providing a library than building a nice shiny new building simply because the financing option has become available. That would leave more money to fix streets such as mine.

Design created and funding determined

The consulting company then used a “programming chart” to determine the needs of the facility and how to fit it within eight million dollars (actually according to McQuillen it was about $8.3 million). Based up on the output from the consulting company architectural firms were then asked to design a new building. The plan that was ultimately chosen is a building which meets the needs put forth by the consulting company and fits within the financial constraints.

The Foundation felt this plan was the best and challenged the city to build the project. At this time the Foundation already had $800,000 in the bank, and felt it could easily fund-raise another $1.2 million, giving them a total of $2,000,000 to help fund the new building. That would leave $6,000,000 for the City to fund. There was a fundraising feasibility study done to show the Foundation could easily get the additional funds. The city council agreed to bond the entire amount, and the Foundation agreed to pay its portion of the project as their money came in.

Time for my opinion again. I have been involved with non-profits in the past which have been burned by feasibility studies. I think it would have made some opponents of the project less nervous if the Foundation had proved it could actually raise money. Right now, if the Foundation is unable to actually raise the matching funds it promised, it appears that the missing dollars would have to come from the taxpayers. That has made some opponents very nervous.

Outdoor space

Layout of the new library. Photo provided on the buildanewlibrary.com website. Click to make bigger.

The new library includes an outdoor space. I specifically asked McQuillen about this space because it has been touted by many library bond proponents as an important feature. The building’s design calls for 800 sq ft of outdoor space to be used.

McQuillen stated much of the Science, Technology, Engineering and Math (STEM) programming currently done by the library requires the use of outdoor space. He noted the space provided will be covered and have outside reading areas included. This is part of a nationwide trend in libraries to get kids outside.

Here is an area I partially agree with McQuillen and other library bond proponents with. If a new facility is going to be built I do think a nice outside area would be an appropriate addition. But, I don’t see it as a reason in and of itself to build a new facility.

The Kitchen

The kitchen included in the plan was brought up by McQuillen because many opponents have asked whether it was necessary. The current library has food club classes that are apparently pretty popular. This proposed kitchen is not industrial, McQuillen made sure to point that out. Rather it is meant for basic home style cooking.

This is another area I partially agree on. If a new library is to be built I think it is valid to include. But I don’t see it as a reason to build a new library. There are already cooking classes that utilize the ARCC. I would imagine (but haven’t verified) that clubs could also utilize facilities within the ARCC.

Will the Foundation support other options

I asked McQuillen if he thought the Foundation would support other options if the library bond is shot down by the voters. Specifically I said using the ARCC, renovating the current building, or any other proposal. McQuillen didn’t see any reason the Foundation wouldn’t at least look at other options. At its core the Foundation was created to improve library services.

This is a question didn’t expect McQuillen to answer at all. His question was guarded, but at least he answered it. Right now the Foundation is pushing hard for this new library, but I do think there are opportunities to work with the Foundation on solutions going forward if the library bond is denied.

Lack of Upgrades

I asked McQuillen about the rumors that the library has purposely held off on upgrades to make it look like a new facility was necessary (I realize the library and Foundation are separate, but I wanted his take on this question). He believes that is outright false. Specifically he noted that until very recently the State of SD made contact with data providers. City libraries, such as the current Aberdeen Library, could then just pay the state and gain access to those providers. That system suddenly went away, and the library just now has been implementing a new system. He wanted to note this was being implemented now, and was not held off until a new facility was built.

Trying to be modern

McQuillen then mentioned that in my post about the library I identified myself as having a more traditional view of libraries. He believes that libraries mean something different today than it did in the past. Modern libraries are more about community togetherness and communications.

Maybe I’m too stuck in my old views of libraries. But I still don’t agree with Library Bond supporters in thinking that the library is about community. I feel libraries should be focused almost purely upon getting access to information. There are many other venues in the community available for togetherness.

Workforce Development and Quality of Life

McQuillen also sees the library as a workforce development tool. He notes that many large businesses in town have spoken in support of amenities such as a new library. They believe it will help the quality of life for employees and can be used as a workforce development tool. Projects such as the YMCA have proven popular and McQuillen believes the new library will have the same positive results.

I do agree that having a library does impact quality of life and workforce development in a town. But I would question whether having a new library will actually increase either area in a noticeable way. I believe this is an area where it is more of a matter of having a library or not.

Final Thoughts

I’ll end the post here. I did speak with McQuillen on a few more topics, and I may post about them if I find time. Even after speaking with McQuillen I just haven’t seen a reason that a new shiny library is needed. I am still opposed to the Library Bond. I feel for a fraction of the cost the current building could be remodeled into a very functional and visually pleasing library.

PS. I would like to thank Troy McQuillen for being willing to speak with a blogger that is opposed to a project he is supporting. We bloggers are not always nice to people with opposing viewpoints and I respect him for the time he gave me.

Earlier this week I brought attention to the South Dakota Gaming Commission holding a hearing about the fate of fantasy sports in SD. The core of the issue is whether fantasy sports wagering is a game of skill or if it is a game of chance. Personally I know enough people who participate in fantasy sports to understand it is a game of skill (one that takes a LOT of time). There was a potential that the South Dakota Gaming Commission meeting yesterday could clear up some of the confusion. That didn’t happen.

The SD Gaming Commission has yet to post minutes from the meeting, but the Argus Leader posted the Associated Press account of the meeting. A lobbyist for the industry, Griffin Finan, went before the Commission to make the case that fantasy sports betting is not a game of simple chance. The AP report notes that the industry will likely seek legislative protection for the industry:

Finan said more than 25,000 South Dakota residents are estimated to participate in daily fantasy sports contests each year. The industry may pursue legislation in South Dakota that would clarify that fantasy sports is exempt from state gambling law and impose consumer protection measures on operators, he said.

That will definitely be legislation I will be track during the 2016 session!

It was actually a statement in the article from Governor Daugaard’s spokesman that sheds light on where opposition to such legislation will come from:

A spokeswoman for Gov. Dennis Daugaard said in a statement that the governor would “consider any legislation, but is very concerned about allowing gaming in South Dakota that is unregulated and that competes with gaming that generates state revenue.”

There are two problems I see with the above statement. First the belief that such enterprises in South Dakota are completely unregulated. The very word unregulated has no meaning in the currently over-regulated United States. There are a number of federal and state regulations that the fantasy sports wagering industry must comply with, especially in the realm of consumer protection. If there is fraudulent behavior with one of the players in the industry (such as insider trading) current consumer protection laws can be used.

Second, and more important, is the governor’s office being concerned about competing with the fantasy sports industry. That is the main obstacle I foresee for any legislation coming in 2016. The State of South Dakota makes a lot of money off gambling. In order to keep getting that money it is likely big government politicians will push to keep the states monopoly over gambling secure. Technically there are already games of change that are exempt from the current state gambling ban in South Dakota. But are the big government bureaucrats in Pierre willing to give up even a little more gambling money in order to allow people to spend their own money how they wish? That will likely be a big part of the upcoming battle.

The remarks from the Gaming Commission and the AG’s office in the AP report are pretty wishy-washy. They really aren’t taking a stand at this time. It will likely take legislation providing guidance for those groups to understand that people should be allowed to spend their money however they see fit.

Syrian refugees are an obvious big topic right now due to the terrorist attacks in France. For the most part in South Dakota I’ve seen the issue split on party lines. Republican politicians in SD have spoken out against allowing Syrian refugees into South Dakota. Democrat politicians have actually been pretty quite, but I’ve seen Democrat groups within the state speak in favor of allowing refugees. And of course the Republican Governor has not joined the majority of Governor’s around the country that have decided they don’t want Syrian refugees. In this post I won’t look in-depth into the issue or try to provide a solution. Instead I will just add a few random thoughts to the debate.

First, I have a pretty libertarian view of immigration as a whole. For the most part I believe in open borders and believe fixing the broken immigration system should be a top priority of Congress. Additionally I generally believe taking in refugees from war-torn countries is morally the right thing to do. Notice I used the word “generally” in the previous sentence. The situation we are currently in is much more complicated than the two big parties are making it out to be.

The reason I am hesitant in this situation is because of the massive potential security risk allowing these particular refugees would create. I am coming at this from the point of view of someone who HAS been through overseas deployments and knows first-hand some issues that were had with groups similar to ISIS purposely infiltrating refugee camps in order to punish those very refugees. Now granted, the situations I personally know of were targeted directly at punishing refugees that were seen as traitors. But it is not hard to imagine the same processes used could be used to get further through the refugee program in order to punish countries that are taking in refugees. To me this isn’t a debate over whose statistics are better or who feels they have the higher moral ground. Instead I am looking at past experiences and believe that as a country the United States should proceed very cautiously.

Another thing to consider is how well the Obama administration will screen the refugees brought into the United States. Normally I would say taking in refugees is a good thing. But the current administration has proven even more efficient than his predecessor (GW Bush) at killing people in the Mid East, especially civilians. Believe it or not I tend to think that having family and friends killed by an unmanned drone tends to piss people off and make them hate America. If Obama keeps his war-hawk ways going and aims full-force at Syria it can be expected that some of those refugees will also start to gain resentment towards the US as their friends and family are killed. Is it possible at that point to screen out people who will get pissed off in the future because the United States continues to kill their countrymen in what could end up being a thirty-year war? I can’t imagine anyone coming up with a screening system that could account for such factors.

Finally I want to touch on whether the governors should accept refugees into the State. Yes, as many Democrats have pointed out, immigration is a Federal issue. In reality it is unlikely the States can stop refugees from being placed in their states. But that doesn’t mean the states simply need to sit back and take refugees without a fight. One thing state governors can do is publicly support or reject refugees. Now that a majority of the states have governors opposing refugees it might be time for the Obama administration to sit back and come up with a better strategy. If Obama were to simply roll ahead with his plan without acknowledging what the majority of the states want I fear bad backlash in Congress. Right now there is a Republican majority in Congress. I can foresee legislation coming that will further erode the broken immigration system just so Congress can keep a tighter reign on what the Obama administration is doing. That would be bad and would distract Congress from actually working on an immigration solution that works.

I think I’ll end this post here. Like I said at the beginning of this post I am pretty much an open borders type of person. Yet at the same time I have reservations about letting Syrian refugees in under the current immigration system and especially under the current executive administration (GW would have been equally as bad). This is a tough one to be sure. My heart says to allow the refugees, while my head says keep them out. Perhaps in the future politics of the two big parties will mature to a point where they can realize issues such as this are not as simple as their talking points make it seem.

So should SD accept refugees? That is a damn good question…

PS. My deployments happened under the “peacetime” President Clinton. The more things change, the more they stay the same…